Wednesday, May 1, 2013

This Week Hilliard has just published online an additional story about the sale of the Grener property. Some points need to be corrected in my opinion:

"Patrick Shivley, a Columbus developer who is founder and managing director of Help All Kids Play, said he presented his proposal to Hilliard board members during a closed executive session July 5, 2012."

There was no 'closed executive session' on July 5, 2012. The Board did hold an executive session at the end of the regular Board meeting held on July 9, 2012 to discuss the sale of property, as recorded in the official minutes. I was present for this session.

However, I have never met Mr. Shivley.

The headline "Hilliard board received higher offer for 124 acres" fails to consider the time-value-of-money. Paying the Board $50,000/acre over 30 years is not the same thing as getting $50,000/acre - $6.2 million - in cash at closing.

Assuming 30 annual payments of $206,667 ($6.2 million divided by 30) and an interest rate of 2.83% (this week's yield on the 30 year Treasury Bill) the Present Value is $4,141,240.

In other words, on a Present Value basis, this offer is more like $33,400/acre, substantially less than the Rockford offer.

For the Shively offer to have the equivalent Present Value as the Rockford offer - which netted to $38,800/acre after the 3% brokerage fee - the Shively offer would need to have been to pay $240,000 per year for 30 years, totaling $7.2 million or $58,089/acre.

I doubt that there is a best practice established for school districts selling raw land because I suspect it very rarely happens. School districts buy land on which to build school facilities, not for speculation.

No, there was no gain on the sale: the land was purchased for $50,000/acre and sold for $40,000/acre. The objective was to free up stranded cash, not to make a profit on the sale. The land was purchased at a time when the real estate market was hot and developable land in our community was scarce. Neither is the case ten years later, and this land may be never be worth $50,000/acre again.

You could also ask where I'll be living in five years - it's been 10 years since my youngest graduated. The school board is supposed to represent all the voters, not just the people with kids in school.

Interestingly, 60% of the voters in our district don't have kids in school, which is the same compostion of the current school board: neither Doug, Lisa nor I have kids in school.

Yes, everything is funded by taxes, but not necessarily by the same people for the same purpose.

The municipalities are funded primarily by income taxes, which are paid by people who work in the municipality. Many people who live in the City of Hilliard don't pay any Hilliard income tax, because they work elsewhere. The largest income tax generator in the City of Hilliard are the employees of Hilliard City Schools, who don't all live in the school district.

The school district is funded by property taxes, paid by those who own property in the district, whether residential, agricultural, commercial or industrial.

It is the responsibility of the school district to operate a school system, including the facilities necessary to do so. It is the responsibility of the municipal governments to own park land and public recreation facilities.

If the City wanted this to remain a park or a public recreation facility, they've had at least seven years to make an offer. Having the City purchase the land would have transferred the cost of ownership from the set of folks who pay Hilliard Schools property tax to the set of folks who pay City of Hilliard income taxes - and those aren't the same sets of people.

By the way, this is exactly why the City of Hilliard is so fond of using TIFs for new development, because it transfers the funding burden for new streets, sewers, etc from those who pay income taxes to the City to those who pay property taxes to the school district - a much larger tax base.

You may not agree with my reasoning, but I object to being called disingenuous. I've laid out the whole story, to the extent I know the facts. You are free to draw your own conclusions, and hold me accountable for mine.

"For the Shively offer to have the equivalent Present Value as the Rockford offer - which netted to $38,800/acre after the 3% brokerage fee - the Shively offer would need to have been to pay $240,000 per year for 30 years, totaling $7.2 million or $58,089/acre."

So that offer has to jump to $58k/acre to be as viable as the Rockford one... but you fail to consider the increased cost to the district of educating the kids from the land over the same 30 year period which the Rockford sale will incur.

That's about a $50m cost to the district which, lets face it, dwarfs any other number here...

One more question: would the alternative use of the property have generated any property tax revenue for the district? I am not familiar with the proposal and if they would be gunning for or eligible for some kind of tax abatement?

As I suggested in the prior post, the other factor to consider is where we would be had that land not been purchased by the school district in 2003. I think it is almost certain that it would have been purchased by a developer anyway, unless the Grener family would have been prepared to forego the several $million to keep it as farmland. That's been pretty hard for families to pass up.

When my wife and I bought our property in Brown Twp 25 years ago, the real estate guy told us that the fields across Roberts Rd from us had been left by a widow to her church. We naively thought this was a good thing. However, it didn't take long for that church to monetize her gift - by selling to Homewood Homes.

In short order, pretty much every piece of land in the Hilliard annexation zone (defined by their water contract with Columbus) had been bought up by developers, who were just biding their time until Hilliard grew to out to them. That has finally happened, and now Dan O'Brien is building Heritage Preserve.

The Grener property was already there in 2003, which is what made it so valuable.

So had a developer indeed purchased that land ten years ago, instead of the school district, the only difference would been the $10,000/acre transactional loss we're now realizing.

I can't answer your question about whether the non-profit entity would have had to pay property taxes. I suspect they would have, as Tree of Life - a religious institution - is paying property taxes on the former CompuServe headquarters on Henderson Rd in Upper Arlington. At least the County Auditor's website indicates that they are.

The question would be how the property would be valued in the proposed use. That I don't know.

Paul, I am not disputing what would likely have happened had the district not bought the land in 2003.

I am disputing that this deal is in any way shape or form beneficial for the school district. It isn't.

Over the next 30 years it will cost us about $50m in new taxes not raised by the taxes on the properties built in the development to educate the kids the development will bring now that the district has agreed to sell the land to a developer.

Indeed. In fact, it may be that the primary reason you're raising this point is that I've been preaching it for the last six years, starting with this article. I learned of this dynamic through being a part of the committee which developed the 2005 Comprehensive Plan for Brown Township. It was in fact this effort which led me to run for the School Board.

Hence my comment that voting in favor of this sale is incongruent with my long-held position. Somewhere in this blog I've even made the argument that it would actually save the taxpayers money to buy farmland to prevent its being developed.

Some have suggested that it's illegal for a school district to do that. I don't know that to be true. But I'm very confident that if we put a levy on the ballot for a few $million for the stated purpose of taking land out of the development pool, there's not a snowball's chance of it passing.

This isn't the last 100 acres available for development in our school district. There are thousands of acres which could potentially be developed, and the Big Darby Accord creates a pathway for doing exactly that.

Meanwhile, this is the only hunk of land in the school district which has $5 million of the school district taxpayers' money tied up. It retrospect, it should never have been purchased, although it looked like a very reasonable thing to do at the time.

For me, the primary lesson learned is that we should not purchase land for new buildings until we have also secured the money to construct the intended buildings. That would prevent as situation like this from recurring.

It might make a lot of sense to take out a purchase option on a piece of ground which might make a good school site in the future. If the need never arises, or a better piece of land is found later, or the community decides it's a stupid place for a new school, the cost to walk away is only what we paid for the option.

This Grener deal isn't the beginning of a trend. It's simply a way to unwind - to the extent we can - a deal that went south.

Charlie Boss of The Columbus Dispatch filed this story. While she wrote that there were three failed attempts to get a bond levy passed to build the third high school on the Grener property, I believe there were two.

The tone of this story might imply that selling this land to Rockford was my idea. On the contrary, Rockford approached us, and after appropriate deliberation, it was the unanimous decision of the school board to enter into this agreement.

I was happy with the Dispatch story since at least it implied development as a potential problem. (I still question whether many in Hilliard understand that, given the representation we have and have had.)

But I find it a good sign that the school board selling to developers is even controversial - I tend to doubt it would've been ten years or more ago?

Fwiw, I think you came off well in the story - admitting it was an odd decision was a refreshing honesty. Most politicians wouldn't have done as much since any show of weakness will be pounced upon by hacks like Schonhardt. And, you had a defensible reason. It's interesting - there's symbolic value in not selling to a developer but I'm not sure how much symbolic value is worth since it transcends economics. People have gone to war over symbols. "It's the principle of the thing," can be stupid or noble I suppose.

I agree - developers have had free reign in central Ohio for lots of years, primarily because the voters have never understood the link between development and the cost of providing local government services. Rarely does the incremental revenue cover the incremental cost. I hope I've played some role in spreading the word.

So many political debates are based solely on feelings and opinions, without an underpinning of knowledge-based reason. Governing by sound bite. There's plenty of that going around on this matter...

After discussions with the City of Hilliard, Rockford Homes has decided that this purchase no longer makes sense for them, and terminated the deal. To my knowledge, there is no one else interested in purchasing the property at this time.